Probate is the legal proceeding in which a court determines how an estate will be divided. The court will follow your Last Will and Testament in distributing your property, unless it is contested by your heirs.
Some people think having a will avoids probate. This is not the case. A will is used in probate to determine who receives what property, who is appointed guardian to any minor children and who will be responsible for carrying out the wishes contained in the will.
If an estate includes real estate or minor children, a formal probate action in court is generally required. However, if the value of the estate does not exceed $50,000, probate is not mandatory in many states.
Probate can be very expensive if you do not plan correctly. For instance, if you do not have a will, the court will need to appoint an administrator. This can take a long time and cost a significant sum of money. The court will often charge a hefty fee (sometimes 5-15% of the value of your property) to probate your estate.
To avoid probate, other estate-planning devices should be used. Joint tenancies, pay-on-death accounts and living trusts are some of the most common estate planning methods.
